The Impact of Online Recommenders: Reinforcing The Head; Facebook Apps As An Example?
An interesting research paper out of Wharton about the effect of online recommendation services and their users and the theory that they tend to drive consumers to concentrate their purchases among popular items rather than allow them to explore and buy whatever piques their curiosity. A write-up about the paper is here on Knowledge@Wharton and the rather technical paper itself is here for download. The authors come to four conclusions: -- “One, some common recommenders lead to a net reduction in average sales diversity. Because common recommenders (e.g., collaborative filters) recommend products based on sales and ratings, they cannot recommend products with limited historical data, even if they would be rated favorably. In turn, these recommenders can create a rich-get-richer effect for popular products and vice-versa for unpopular ones. This finding is often surprising to consumers who express that recommendations have helped them discover new products. -- In line with this, result two shows it is possible for individual-level diversity to increase but aggregate diversity to decrease; recommenders can push each person to new products, but they often push us toward the same new products. -- Result three finds that recommenders intensify the effects of chance events on market outcomes. At the product level, recommenders can ‘create hits’ out of products with early, high sales due to chance alone. At the market level, in individual sample paths it is possible to observe more diversity, even though on average diversity often decreases. -- Four, we show how basic design choices affect the outcome. Thus, managers can choose recommender designs that are more consistent with their sales or product assortment strategies.” The paper focuses on online e-commerce sites, but a rather timely analogy on Facebook apps is here. Chris Anderson, Wired editor and author of “The Long Tail” explains why only a few of the top Facebook apps are popular, and rest completely fall of the chart: “The social networking on Facebook is too powerful. This is the tyranny of network effects, where viral success is the only kind and popularity snowballs into an avalanche or goes nowhere at all. That sort of herd behavior is usually a sign of an immature market.” Then of course, the very erudite crap-theory: “Most apps are total crap. That, in turn, may say something about the whole idea of Facebook as a platform.”